News stories are emerging from the United States about limited withdrawals being permitted for users. A maximum of $10 per day may be withdrawn from Coinbase for some users, and there are accounts all over the Internet detailing how applications to increase withdrawal limits have been denied.
Bitcoin is in the middle of a price rally, so it is possible that users would like to realize some of their gains and take some money off the table. There are more than 40 posts in the complaint thread that show a degree of skepticism about how Coinbase manages its operations
In the United States, there are very few options for buying Bitcoin. In fact, there is pretty much just Coinbase. This is what makes this problem even more of an issue.
The Silicon Valley Darling
Coinbase is backed by several prominent venture capitalists out of Silicon Valley and is seen as the crypto darling of the established technology world. This creates the perception of Coinbase being centralized and riskier as an exchange, which only gets worse with this new news about the $10 withdrawal maximum.
Of course, all of this raises questions about how strong an investment crypto could possibly be if it is impossible to get your money out of it. With Coinbase being the leading United States institution for investing in crypto, they may be doing damage to the investment thesis, as a solid exit is the key to an investment transaction.
With the recent rally in the price of Bitcoin, many have wondered if it could be attributed to manipulation from whales. Although the term “whale” is often used to describe single investors or entities, the same effect could emerge if a major exchange were to stifle withdrawals from the ecosystem. That would leave money trapped in Bitcoin and artificially prop up the price.
Why would a company like Coinbase do this? Well, the price of Bitcoin is essentially the best advertising the company can get. It attracts more investors into the ecosystem and earns media attention without Coinbase even having to pay for it. The result is a net win for them and all they have to do is keep money in the system a little longer.
Now, perhaps this is nothing as nefarious as that, but it is an idea worth considering. At the same time, it highlights the need for network participants who aren’t as centralized, as this is a problem that could be avoided if that were the case.